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Olive Garden defends unlimited breadstick policy as 'Italian generosity'

It's the battle of the breadsticks. After Olive Garden was criticized by one of its investors for giving endless breadsticks to guests, leading to food waste, the casual Italian chain has defended the practice as "Italian generosity."

Last week, ahead of an annual shareholder meeting, activist investor Starboard Value LP let loose a 294-slide report detailing all the various areas owner Darden Restaurants needs to cut back or improve to boost profits at the faltering Olive Garden chain.

Starboard, a hedge fund seeking to take over Olive Garden's board of directors, called the salads "overdressed," the pasta "mushy" and "unappealing" and compared the overserved breadsticks to "hot dog buns."

In criticizing the number of breadsticks served, Starboard pointed to waiter training lapses. It cited how 10 years ago Olive Garden servers would place one breadstick per guest plus an additional one for the table. More would be served on demand, hot. That lead to a better guest experience and more opportunities to interact with the staff. 

Nowadays, servers aren't sticking to the rules, and "will bring an excess of breadsticks significantly outnumbering the number of guests," wrote Starboard. The breadsticks get cold, there is food waste and having fewer server visits takes away from the customer experience, they asserted.

According to the report, when servers stuck to the still in place breadstick formula, guests ordered more appetizers and desserts.

On Monday, Darden released its own 24-slide response calling Starboard's suggestions "misinformed" and "not based on reality."

"Olive Garden's salad and breadsticks have been an icon of brand equity since 1982," it read. "It conveys Italian generosity."

In an accompanying statement, Gene Lee, President and Chief Operating Officer of Darden, said that implementing some of Starboard's other suggestions, such as to stop making soup from scratch and shortening the length of the asparagus it served, "would derail the brand's turnaround."

"While we agree that maintaining a close eye on costs is important, we do not agree with actions that may boost margins in the short-term, but sacrifice brand reputation over the long-term," said Lee.

But Starboard apparently didn't get all of its ideas wrong. "Many of the brand cost optimization strategies are already being implemented," said Darden in a statement.

And while the hedge fund says Olive Garden's strategies are out of touch with American diners, the popular chain still has pull.

Last week the chain started selling a limited 1,000 "pasta passes" for $100 that granted bearers the right to eat as much pasta, salad, Coke products, soup, and yes, breadsticks as they wanted during their annual 7-week "Never Ending Pasta Bowl" promotion. The passes sold out in 45 minutes. Some of the buyers promptly flipped them to eBay, where they began fetching upwards of several hundreds of dollars.


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